Kandlproperties Inc. v. George Street Law, Et Al., 2023 Onsc 1495
In the recent decision of Kandlproperties Inc. v. George Street Law, et al., 2023 ONSC 1495, https://canlii.ca/t/jvxlb the Ontario Superior Court considered issues relating to a writ of seizure and sale, and the equitable remedies of injunctions and specific performance. The proceeding was presided over by the Honourable Justice Nicholson of the Ontario Superior Court of Justice.
In the related decision of Kandlproperties v. Big Bang, https://canlii.ca/t/jp0z3, released in April 2022, Nicholson J. granted summary judgment in favour of Kandlproperties Inc. (“Kandlproperties”) in their proceedings against Big Bang Consulting (“Big Bang”) with respect to a failed real estate transaction arising out of an agreement of purchase and sale (“APS”). The relevant property which concerns the prior judgment, and the following is 1272 Grammercy Park Place, London, Ontario (the “London Property”).
On the original summary judgment motion, Nicholson J. granted judgment in Kandlproperties favour but refused their request for specific performance. Their request was that Big Bang sell the London Property for Kandlproperties to recover on its judgment. His Honour declined as this was an enforcement issue and Kandlproperties had other means of enforcing their judgment. Nicholson J. ordered that the Certificate of Pending Litigation (“CPL”) that had been placed on the London Property be discharged thirty days following the expiration of the appeal period. The parties agreed to costs and judgment and damages were awarded in the amount of $145,461.27.
Nicholson J. notes in the current motion that his intention was for Kandlproperties to have requisite time to “protect its judgment” and that it was foreseeable that they could appeal with respect to quantum of damages or on the issue of specific performance. The appeal period expired on May 22, 2022, and no appeal action was taken by either party.
Following this, Kandlproperties caused a writ of seizure and sale to be issued on the London Property and filed it in the County of Middlesex, effective as of June 3, 2022. Kandlproperties indicated in its written material and oral argument for the most recent motion that that it could not have a writ issued until the expiration of the appeal period. Nicholson J. notes that he could see not authority, rule or aspect of the Execution Act which contain this restriction. In fact, rule 63.03(3) of the Rules of Civil Procedure (the “Rules”) suggests that a writ of seizure and land sale may be issued even if appeal taken, although not acted upon.
In July 2022, the CPL on the London Property was discharged. Kandlproperties took steps to enforce the writ but was advised by Sheriff’s office that no steps could be taken to sell the land within 6 months of writ’s issuance as per rule 60.07(18).
In September 2022, Big Bang transferred the London Property to Gramercy Park Holdings (“Gramercy”) for $1,092,000.00. Despite the existence of the writ, no portion of these funds were paid to Kandlproperties, nor were they advised of the transfer. Kandlproperties learned of the transfer in January 2023, and that lawyer Mr. Robert Wood had filed an Application General with the Land Registry Office to have the writ removed from title to the London Property.
It was in May 2022 that Big Bang and Gramercy entered into an APS. Defendant Li Cheng entered the APS to purchase the London Property in trust for a corporation to be formed later; Grammercy. There was no evidence that this was an arm’s length transaction.
The other parties to the motion include George Street Law (counsel for Gramercy in the transfer), Summer Harb (an associate with Georg Street Law), Mr. Robert Wood (counsel for Big Bang) and Li Cheng (an officer and director of Gramercy and also associate with George Street Law).
In the most recent motion before Nicholson J., Kandlproperties sought an interim Order:
- precluding Gramercy, or any related parties or representatives, from transferring or encumbering the property;
- declaring that Kandlproperties continues to maintain a valid and binding writ of seizure and sale over the property; and/or
- permitting Kandlproperties to register an Application for Restrictions Based on Court Order on title to the property.
At the outset Nicholson J. notes that Kandlproperties made no claims of fraudulent conveyance, and the evidence indicates an arm’s length transaction with Gramercy being a good faith purchaser.
Relevant case law
During oral arguments, counsel made extensive reference to Dhatt v. Beer, https://canlii.ca/t/jcxkx,a case where the plaintiff successfully sued the defendant for specific performance with respect to a failed sale of a residential home. Appeal from the original decision was dismissed. In Dhatt, former lawyers for the defendant successfully sued the defendant for unpaid legal costs and registered several writs of seizure and sale against title to the subject property. The lawyers wanted the Sheriff to enforce the writ by selling the property during the trial. The trial judge C. Brown J. stayed the Sheriff’s sale pending the release of the decision. Before the Honourable Justice Myers in the Ontario Superior Court, the lawyers moved for an order setting aside the decree of specific performance. The plaintiffs moved for an order declaring all the writs of execution made after their agreed purchase and sale did not bind the land.
In assessing the cross-motion by the plaintiff, Myers J. analysed the relevant case law at the Ontario Court of Appeal, most notably Mercado Capital Corporation v. Quershi. According to Myers J. the case law indicates that once there is a valid contract for sale, the vendor becomes in the law of equity a trustee for the purchaser of the property and the beneficial ownership passes to the purchaser, so long as the transaction subsequently closes or a decree of specific performance is later made by court. Moreover, any writ of seizure and sale issued after execution of the contract does not bind the purchaser’s equitable interest in the land. This is the case whether or not the purchaser has paid the full amount of purchase price at the time contract formed or at closing. As Myers summarises: “subsequent writs of execution that bind the vendor’s interest, cannot attach to the purchaser’s equitable title or right to specific performance once the agreement of purchase and sale is signed”.
Nicholson J. considered Dhatt with respect to the issues in the current motion. Kandlproperties, as the execution creditor, could only claim an interest which Big Bang had in the land, not Gramercy’s. His Honour rejected the argument that Kandlproperties had any interest in the land until the appeal period expired. His judgment was effective as of the date of its release and provided Kandlproperties entitlement to damages and no equitable interest in the property. An appeal would have simply stayed the judgment. As the APS was entered prior to the issuance of the writ, Big Bang divested itself of equitable interest in the land. Further, as sale did subsequently close, Gramercy became the equitable owner as of the date that the APS entered into. The writ cannot attach to Gramercy’s equitable interest in the land in these circumstances.
In their materials Kandlproperties relied on comments made by the Honourable Justice Lauwers in Lograsso v Kuchar, where his Honour describes the importance of writs of execution to ensure that successful litigants recover on hard-earned judgments. Nicholson J. does not dispute this, however Kandlproperties did not secure its judgment in time. A part of Lauwers J.’s comment left out by Kandlproperties states: “(…) executions must be searched prior to acquiring an interest in land to ensure that title is clear of executions”.
Thus, Lograsso does not assist Kandlproperties in their argument as no writ had been issued at the time Gramercy entered the APS and acquired an interest in the London Property. Section 136 of the Land Titles Act, is clear that “[n]o registered land is bound by any writ of execution, renewal or certificate of lien mentioned in subsection (1) until the sheriff has complied with that subsection”.
In Nicholson J’s judgment in Kandlproperties v. Big Bang his Honour declined to grant specific performance or force the sale of the London Property so Kandlproperties could be assured of receiving its judgment. His Honour notes that Kandlproperties could have appealed the decision on the issue of specific performance or to sell the London Property but did not. Kandlproperties is subsequently asking court to do both of these things. Moreover, his Honour agrees with submissions from Gramercy that Kandlproperties still has the ability to pursue other steps to enforce under rule 60 of the Rules and ought not to bind Gramercy who appears to be innocent 3rd party purchaser.
Justice Nicholson highlights the legal test for an injunction, as set out in RJR-MacDonald Inc. v. Canada (AG), and the expanded test in R. v. Canadian Broadcasting Corp:
(a)The applicant must demonstrate a strong prima faciecase that it will succeed at trial. This entails a strong likelihood on the law and the evidence presented that, at trial, the applicant will be ultimately successful in proving the allegations set out in the originating notice;
(b)The party seeking the injunction would, unless the injunction is granted, suffer irreparable harm that is not susceptible or would be difficult to be compensated in damages; and
(c)The party seeking the injunction “must show that the balance of convenience favours granting the injunction”.
His Honour found that Kandlproperties could not meet (a) or (c) of this test. As highlighted, the writ of seizure and sale was not placed on the London Property until after it had been sold to pursuant to the APS as between Big Bang and Grammercy. Accordingly, when considering Myers J. in Dhatt v. Beer, there was not a strong prima facie case in Kandlproperties’ favour.
Nicholson J. could see no evidence that Kandlproperties even attempted other methods of collecting its judgment. Gramercy, as a third-party purchaser in good faith and for good consideration, ought not to have its newly acquired property encumbered by a judgment creditor with whom it has no relationship and to whom it owes no money.
Kandlproperties v. Big Bang highlights an important equitable rule: once there is a valid contract for sale, the seller becomes a trustee for the purchaser of the property and the beneficial ownership passes to the purchaser on the condition that the transaction closes or there is an order for specific performance. Moreover, when considering writs, any writ of seizure and sale issued after the execution of a contract does not bind the purchaser’s equitable interest in the land.
 A writ of seizure and sale is a court order that allows the petitioner (often being a creditor) to take ownership of a property from a borrower.
 Kandlproperties Inc. v. George Street Law, et al., 2023 ONSC 1495 at Para 1 (“Kandlproperties”).
 A Certificate of Pending Litigation is registered on title of a property to give notice and warning that the property is subject to a court dispute.
 Kandlproperties at para 3.
 Rule 63.03 (3) states: “A stay does not prevent the issue of a writ of execution or the filing of the writ in a sheriff’s office or land registry office, but no instruction or direction to enforce the writ shall be given to a sheriff while the stay remains in effect”.
 Kandlproperties at para 6; Rule 60.07(18) states: “No sale of land under a writ of seizure and sale may be held until six months after the writ was filed with the sheriff or, where the writ has been withdrawn, six months after the writ was re-filed”.
 Kandlproperties at para 7.
 Kandlproperties at para 9.
 Kandlproperties at para 10.
 Kandlproperties at para 11.
 Kandlproperties at para 15.
 Kandlproperties at para 17.
 Kandlproperties at para 18.
 Robinson v. Moffatt, 1916 CanLII 576(ON CA),  O.J. No. 107 (Ont. C.A.), J.A.R. Leaseholds Ltd. v. Tormet Ltd. and Kaye, 1964 CanLII 219(ON CA), Kiminiak v. Anderson, 1929 CanLII 367 (ON CA) and
 Ibid at para 31.
 (supra note 13) at para 80.
 Kandlproperties at para 21.
 Ibid at paras 12-13.
 RSO 1990, c L.5
 Ibid at section 136.
 (supra note 2)
 Kandlproperties at para 28.
 Kandlproperties at para 31.
 Kandlproperties at para 32
 Rule 60 of the Rules of Civil Procedure concerns enforcement of orders.